European and U.S. equity futures, as well as equities in most Asian countries, rise (further), while bond yields are falling on speculation that the US Federal Reserve has finished it monetary tightening campaign. We see similar moves in (UK) gilt yields after the Bank of England paused on interest rates – however, with inflation still very high (and stubborn) in the UK, the Bank of England ruled out giving up the fight against inflation anytime soon. We see a stronger GBP, while the USD is broadly lower as the risks of further rate hikes have diminished significantly.
The S&P 500 is on track for its fourth consecutive gain. Recovery gains are even stronger in the Nasdaq 100, which is up up more than 1% after strong earnings reports from Qualcomm, the largest supplier of smartphone chips, which gave a surprisingly strong outlook yesterday. There were more positive earnings reports today as well, with Novo Nordisk standing out in particular. The Danish pharma giant continues its rapid growth thanks to strong demand for its blockbusters for obesity and diabetes. Airbnb gave a disappointing fourth-quarter outlook, citing “greater volatility” in the economic environment – reports and warnings like this have led to heavy selling in October.
Much focus will be on Apple, which will announce its results after the closing bell. Apple opens positive today, and gains in tech stocks are widening. Earnings expectations are low, but there is a high risk that investors are spooked by Apple's continued slow/stagnant revenue growth. Apple's earnings report will play a critical role in Wall Street's year-end performance.
Tomorrow's payrolls data will also be crucial. A weak report would reinforce expectations that the Fed will continue to wait and that interest rates have already peaked. A surprisingly strong report, on the other hand, could lead to heavy profit-taking tomorrow.
I expect the positive sentiment to continue. The Fed, or Fed Chair Jerome Powell, was as dovish yesterday as one could have expected – with Powell also pointing to the risk of over-tightening and noting that high yields on longer-term bonds have further tightened financial conditions.
Falling yields will make gold increasingly attractive, even as current market sentiment improves. Oil prices appear oversold in the face of geopolitical uncertainties. The rocket fire from Yemen (targeting Israel) is another sign that the conflict in the region may widen. Casualties in Gaza are very high, which could further increase resistance to Israel.
We are seeing rising stock prices, but there are more headwinds as economies struggle and economic activity slows (now with increasing signs in the USas well). Manufacturing data in the Eurozone and China remain poor, but hopes that interest rates have peaked support the ongoing recovery rally (for now) and could also rekindle hopes for a year-end rally.
👁 ROB'S MARKET OVERVIEW:
November 2, 2023
🇺🇸 US Markets ↗️/↕️ (Gains extend with potentially some profit taking ahead of Apple's earnings report)
Cyclical Stocks ↗️/↕️
Tech/Growth Stocks ↗️/↕️
Financial Stocks ↗️/↕️
Defensive Stocks ↗️/➡️
Energy Stocks ↗️/➡️ (recovery gains)
Materials Stocks ↗️
AUD ↗️ (benefiting from improved risk sentiment & higher commodity prices)
GBP ↗️ (benefiting from Bank of England's relatively hawkish positioning)
EUR ➡️/↗️ (benefiting from weak USD & JPY)
JPY ↕️ (recovering from recent overselling; remains weak)
USD ↘️ (headwinds from dovish Fed & falling yields )
⚒ Commodity Markets ↕️/↗️
Oil prices ↗️/➡️ (oil oversold)
Natural Gas prices ↘️/↕️
Metal prices ↗️
Gold ➡️/↗️ (gold overall remains in demand, benefits from falling yields)
⚡️Cryptos ↗️/➡️ (benefits from dovish Fed & falling yields)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)